In their clockwork orange world, UK publishers are trying to get to grips with what they hope is their digital future. It is easy to believe that good times are just around the corner. But they're not:
>Despite the sharp declines in revenue and profitability, relatively few newspapers and magazines have actually closed. This reflects: strategic confusion about what to do, or misplaced optimism about future revenues, or formidable closure costs - and sometimes all three. The worst-hit sector is regional newspapers (fleeced of classified profits from property,cars and jobs) which has seen a cull of some 200 titles in the past 10 years and a 20% fall in regional dailies. But that's a fraction of what is still needed. In consumer magazines, things are stranger still: despite huge losses in advertising revenue and copy sales, only a handful of monthly magazines have closed. Similarly, for the UK's legendary national dailies, a cull awaits the post-Murdoch divestment of News Corp's third of the market. The resulting consolidation may include: some papers becoming freebies, some publishing at weekends only, some web-only, and some being closed.
>Few magazine and newspaper publishers are generating sustainable profits from digital activity. The claims of page views, digital subscriptions, iPad and mobile readership come thick and fast. But it is clear that most of these claimed successes are being costed "marginally" with origination and marketing being expensed against the "core" (i.e. hard copy) activity. For some publications (e.g. The Economist and The Week) in which the existing product translates readily into digital form, this may be a route to a profitable longterm. But, for many other magazines, which require much more re-working of content, the digital versions will simply not be sustainable after the demise of hard copy, least of all if Apple takes 30% of the revenue. It is clear that many of these quasi-digital products and services will only survive long-term as much smaller businesses - if at all. And many publishers will have to find partners in order to cope with the growing need for video content and ecommerce. For some newspapers, this may mean alliances or mergers with broadcasters. Almost everywhere, publisher web sites are growing revenues at less than half the 20-25% growth rates of online generally.
Here are some predictions for the 10 losers and winners in the media race to become (or remain) relevant, durable and profitable in the 21st century:
Losers
Paid-for daily newspapers. Regional dailies will lead the way to the graveyard as newspapers pay the price for: falling copy sales, the loss of classifieds, the erosion of display advertising - and soaring oil-based costs of paper and ink. The squeeze is compounded by the collapse in the 'value' consumers place on 'news'.
Paid-for weekly magazines. The UK sector, which once accounted for more than 100% of all magazine profits, is in agony from the loss of readers prepared to pay for celebrity 'news', and the fall in advertising revenue. Expect some weeklies to become free and others to close.
Local weeklies. Traditional paid-for weekly newspapers may almost completely disappear- or go free. But many of the casualties will be gradually replaced by a new wave of micro-newspapers (see below).
Monthly magazines. The general interest magazine model has been broken by falling sales and advertising. Magazines have been squeezed by their inability to raise cover prices which, even in halcyon days, seldom covered production costs. The downward spiral is visible in price promotions, cover-mounted gifts and bundled cut-price magazines screaming from newsstand and supermarket shelves. International magazine franchises, though, are a class apart (see below).
Academic publishing. Profit margins will be slashed by a 2013+ explosion in 'pre-loaded' tablets at schools and universities to replace bags of books; and by accelerating 'free access' attacks on publishers of scientific journals. Like book publishing generally, digitalisation poses not so much a threat to authors and content providers as to the traditional role (and profitability) of publishers. Record labels know the story.
Winners
International magazine brands. Magazines like Cosmopolitan (published in 63 countries) , Vogue (19), Elle (42), Marie Claire (36) and even T3 (22) will be the ultimate beneficiaries of an advertising industry which is increasingly cross-border on the back of the worldwide web. The increasing trend towards global media planning will actually grow advertising revenues for these franchises. This could become a new golden age for international magazine brands, digitally and in hard copy.
'Click through' magazines and magalogues. Net-a-Porter, ASOS and John Lewis are pointing the way towards mediatailing and are clearly poised to grow customer loyalty through expanded 'editorial' content. Publishers who do not recognise the threat of such ecommerce media that allow customers to read about (and then click through to order) products and services will find themselves operating in a much smaller, less profitable market.
Free daily newspapers and weekly magazines. The success of City AM, Metro and London's Evening Standard confirms the appetite of readers (and advertisers) for bite-sized reading. Even more impressively, Shortlist Media (sparky publishers of free weeklies ShortList and Stylist) now has higher profit margins than all but the largest paid-for magazines. There's clearly space for even more well-targeted, free newspapers and magazines especially in the UK's major cities. Expect an existing newspaper or magazine goliath to snap up the vibrant Shortlist Media as a platform for new media growth.
Specialist magazines. Premium-priced magazines for special interest groups can clearly be long-term winners but too many are still hooked on the UK's once so-lucrative retail network rather than posted subscriptions with rich databases. Falling magazine and newspaper sales will lead to sharp range-reductions in supermarkets. The race is on for sub-50,000 circulation magazines to convert into posted subscriptions, free distribution or sponsorship by retailers. While the iPad seems to offer promise to such publishers, the hard copy connection might be necessary, for some time yet, in order to retain advertising revenue.
Local, local newspapers. Regional newspaper groups bemoan the UK monopolies regulations that frustrates consolidation. But it will come. And when it does, new opportunities will open up for a return of very localised media spanning online, web TV - and free newspapers. Micronewspapers and micromedia will be the buzz from 2013. There is great scope for localised media-led ecommerce operations that can help independent retailers compete with the national chains.
The 3 Cs
That list of winners and losers is viewed through the prism of existing media types. But it is easy to predict that the ultimate winners across all media will be characterised by mastery of the "Three Cs"...
1. Content. User loyalty will be secured by original information (including self-generated content) that is targeted, creative and accessible.
2. Community. Users need to have a sense of belonging, "ownership" and participation. Think Facebook, LinkedIn, ASOS, Net-a-Porter and Twitter.
3. Commerce. Product sales and services will be the essential engine of profitable media. Media=Retail and Retail=Media. Think Net-a-Porter.
Content, community and commerce: three words that will increasingly separate the winners from the losers in 21st century media.
Fortune, Fame & Folly in Media